WITH barely three weeks since the change of leadership in the national government, the real-estate industry welcomes the sound economic agenda of President Duterte that would definitely create an impact on the property market, according to an analyst. 

Pinnacle Real Estate Consulting Services Inc. Sales and Research Director Jose Romarx Salas told the BusinessMirror that, while his policies are not entirely different—with some refinements, perhaps—from those of his predecessor, former Chief Executive Benigno S. Aquino III, the industry remains steadfast in anticipating the positive political climate to sustain its growth.

He, likewise, believes that the possibility of additional incentives for construction projects under the new administration would result in a more vibrant real-estate sector.

It is noted that Duterte recently bared his plan to build more economic zones outside of Metro Manila, which might lead to provision of more incentives from agencies, like the Philippine Economic Zone Authority (Peza), Tourism Infrastructure and Enterprise Zone Authority (Tieza), Bureau of Investments and even Philippine Retirement Authority. There is also a subsequent pronouncement made by Finance Secretary Carlos G. Dominguez III to revisit the real-estate investment trust (REIT) law and its implementing rules and regulations (IRR).

This legislation intends to incentivize income-generating properties, such as office, retail, hotel and even residential and hospital developments provided that the companies that own them are listed in the stock market and these firms will distribute 90 percent of their net operating as dividends to stockholders.

Salas cited that “a lot of developers got their enthusiasm dampened because of REIT, especially the giving up of ownership” due to subsequent rules on public float and value-added tax on the transfer, but with the upcoming review of the IRR, most of the “developers are excited about it.”

Based on the Market Insight report released by Presci for the second quarter of 2016, all sectors of the real-estate industry are up. The office segment has been the “best performer,” primarily because of the increasing demand for space from the business-process outsourcing (BPO) companies.

With the BPO industry’s target of 1.3 million employees and annual revenue generation of more than $25 billion in the next couple of years, property developers are building to deliver over 1 million square meters of office space in the next two years in major business districts in Metro Manila, on top of the existing 6 million sqm.

In fact, as high as 40 percent of buildings for next year is already pre-committed and about 80 percent of that will be taken up by BPO players because of their expanding demand for workspace, according to the sales and research director. Even though the planned office stock of Grade A and Prime Grade A office stock seems high, he noted that total vacancy across these business districts is still at a low of 4 percent as of June 2016.

Meanwhile, a new trend in the office sector is emerging—the shifting preference of the corporate market from leasing to buying office spaces due to financial and tax benefits. Salas said the strong demand from BPO locators and increasing rents have compelled some companies to simply acquire workspaces. 

Less than 10 percent of the current inventory is for sale. Given the strong selling market, it is seen to double in the next three years. For the three-month period in review, the study further revealed that the retail subsection comes in as the second driving force of the real-estate industry. This is because the players are now exploring all the store formats, depending on the location, demographic and population in the area they are in, Salas said. For instance, the SM Group has 58 malls; Robinsons Group, 40 malls; and Cosco/Puregold Group, 36 stores.

On the other hand, the Ayalas aim to reach the 3-million-sq-m mark in shopping mall footprint by 2020, as Megaword is set to launch an average of 60,000 to 70,000 sq m of retail space every year until 2019. The Vista Land Group intends to open six to seven AllHome annually over the next five years that would be integrated with their residential developments.

Apart from the malls, these retailers have been venturing to groceries and convenience stores among others.

“Continuous growth in the retail market would make shopping even more convenient to the consumers,” he said.

As to the residential market, there are still more rooms for expansion in this segment, as developers target to deliver 1 million dwelling units to help solve the 5.5-million housing backlog in the country at present.

“Definitely, all the real-estate sectors market are up, but with these incentives, there’s more reason for builders to build,” Salas said of the current status of the property industry. Citing the strong mandate that Mr. Duterte got the past elections and the smooth political transition, he is certain on further sustainable real-estate growth.

“It will definitely become stable this year and beyond,” he stressed. “Business confidence and the support from the people have a significant impact to the economy, especially the real-estate industry.” 

Source Business Mirror
*Minor changes applied